As part of its recently ratified agreement with American Airlines, the flight attendants union received a 3 percent equity stake claim in the carrier once it emerges from bankruptcy.
On Thursday, the Association of Professional Flight Attendants announced how they would split up the equity stake among its members.
The union said it will treat the equity claim similar to retroactive pay and that all flight attendants in service at American on August 19 will be eligible for a part of the claim.
"The Claim will be allocated among eligible Flight Attendants on the basis of W-2 gross earnings (i.e. earnings before any deductions) from January 1, 2009 through August 31, 2012. Each individual Flight Attendant’s share of the Claim will be equal to her/his earnings over this time period divided by the earnings of all eligible Flight Attendants during the same period. APFA believes that this method of distribution is the fairest and most practical, and is consistent with what other unions have done in bankruptcy," the union said in a hotline message to members.
The union said it plans to distribute the equity claim in the form of stock.
Keep reading for the full hotline from the APFA.
As part of the Last, Best and Final Offer (“LBFO”), APFA will receive a “Claim” equal to 3% of the equity (stock) issued by American as part of its Plan of Reorganization. Based on recommendations from the Union’s attorneys and financial advisors, the APFA Board of Directors has decided upon a method for the distribution of the Claim. APFA will treat the Claim in a manner similar to a distribution of retroactive pay. APFA took into account that Flight Attendants have worked under a concessionary agreement for more than four years beyond its amendable date and have not received any wages increases during that time.
All Flight Attendants in the service of American as of the ratification of the LBFO on August 19, 2012, will be eligible to participate in the Claim distribution. The Claim will be allocated among eligible Flight Attendants on the basis of W-2 gross earnings (i.e. earnings before any deductions) from January 1, 2009 through August 31, 2012. Each individual Flight Attendant’s share of the Claim will be equal to her/his earnings over this time period divided by the earnings of all eligible Flight Attendants during the same period. APFA believes that this method of distribution is the fairest and most practical, and is consistent with what other unions have done in bankruptcy. APFA intends to distribute the Claim to Flight Attendants in the form of stock if possible, but the administrative process for distributing the Claim must still be worked out over the coming months.
The APFA leadership felt that it was necessary to make a decision now regarding the method for the distribution of the Claim so that Flight Attendants would have this information as they consider the Voluntary Early Out Program (“VEOP”). We caution, however, that the amount of the Claim and the timing of the distribution are unknown at this point. Ultimately, the value of the Claim will be subject to a number of factors that cannot be quantified at this time (for example, the timing of emergence, market conditions, AMR and industry performance, and capital requirements). The value of the Claim will be estimated by American toward the end of the bankruptcy process as part of the Plan of Reorganization, and ultimately the stock market will set the value of the Claim based on the market price for stock in the restructured Company. In addition, the Claim is based upon American’s LBFO. The term-sheet agreed to with US Airways also provides for a claim in the event that US Airways acquires American, but the amount of that claim has not yet been determined and would be the subject of further negotiations with US Airways and the UCC.
Procedures For the Distribution of APFA 3% Equity Claim - 8.29.12
APFA will be receiving 3% of the equity issued by American Airlines to holders of unsecured claims (“Equity Claim”) as part of the Company’s Plan of Reorganization in the pending bankruptcy proceedings. APFA intends to distribute that Equity Claim as follows:
Eligibility: Flight Attendants in the service of American Airlines (“American” or “Company”) as of the date of the ratification of the LBFO, August 19, 2012, will be eligible to participate in the distribution.
W-2 Earnings Basis: The distribution formula will be based on each Flight Attendant’s W-2 earnings. W-2 earnings will be defined as total gross earnings paid by American and APFA for service during the applicable measurement period. APFA will rely on records provided by American and its own payroll records in order to determine W-2 earnings.
Measurement Period: The applicable measurement period will run from January 1, 2009, to August 31, 2012. This measurement period is intended to the extent administratively feasible to coincide with the period from the amendable date of the APFA CBA (May 1, 2008) to the ratification date of the LBFO (August 19, 2012).
Distribution Formula: An individual Flight Attendant’s share of the distribution will be equal to her/his total W-2 earnings during the measurement period divided by the aggregate total W-2 earnings of all eligible Flight Attendants during the measurement period.
Claims for Prior Early-Out Payments: Upon filing for bankruptcy, American ceased making monthly payments to individuals entitled to benefits under the 1995 Special Early Out Bridge to Retirement Program and the 1996 Early Out program, in violation of the APFA CBA. APFA asserted claims on behalf of these individuals in its proof of claim filed in the bankruptcy proceeding and therefore these claims were settled as part of the LBFO. The amount of these claims can be ascertained from the terms of the APFA CBA. Accordingly, these claims will be paid from the Equity Claim at the same pro rata rate as generally paid by American to unsecured claimants in the bankruptcy proceeding. These claims will be paid before the W-2 based distribution formula is applied to allocate the Equity Claim.
Form of Distribution: APFA intends to arrange for the distribution of the claim to eligible Flight Attendants in the form of stock in the reorganized Company. If it is not administratively feasible for APFA to make the distribution in the form of stock, APFA will arrange for the liquidation of American-issued stock at the earliest time practicable and arrange for distribution to eligible Flight Attendants in dollars and subject to any applicable withholdings.
Timing of Distribution(s): The timing of distribution(s) of equity by American will be dictated by the Company’s Plan of Reorganization and the timing is currently unknown to APFA. APFA will endeavor to make distributed amounts, whether in stock or dollars, available to eligible Flight Attendants as soon as practicable after distribution by American.
Administrative Costs: To the extent that there are administrative costs associated with the distribution of the claim, such as fees associated with maintaining stock accounts for the purposes of the distribution, the Equity Claim amount may be used to cover these administrative costs.
Unclaimed/Undeliverable Distributions: APFA will make reasonable best efforts to insure that all distribution amounts are received by eligible Flight Attendants. If distributions remain unclaimed or undeliverable six months following the final distribution of any amounts from the Equity Claim, then these unclaimed or undeliverable amounts will revert to APFA to be used for the general benefit of the membership.
De Minimis Distributions: APFA may determine not to make de minimis distributions. A de minimis distribution is defined as a distribution where the value of the amount to be distributed does not exceed the administrative costs associated with making the distribution. The value of any de minimis distributions may be reallocated based upon the distribution formula if practicable, or otherwise will revert to the APFA to be used for the general benefit of the membership.
Amendments to the Equity Claim Procedures: In the event of a material change in circumstances related to the Equity Claim or the discovery of facts presently unknown to APFA, the APFA Executive Committee, subject to the approval of the Board of Directors, reserves the right to amend these procedures as may be appropriate in light of the changed circumstances or new information.